Polanyi and the First Derivative of Social & Economic Change

I am not a conservative. Quite the opposite – I think of myself as very progressive, liberal, all the things you associate with a typical Sociology graduate student. I cheered the recent Prop 8 decision declaring marriage a fundamental right for which there is no rational basis to restrict to only opposite gender couples.* And yet, when it comes to economic changes, I find myself thinking more and more conservatively of late. I do *not* mean to imply conservative in the sense of Republican, with policies supporting the rich getting much, much richer (see this recent Hacker and Pierson article for an excellent analysis of the political origins of the recent tremendous rise in inequality focused on the richest getting richer). What I mean is more along the lines of Schumpeter’s creative destruction.

Schumpeter argued in Capitalism, Socialism and Democracy that capitalist economies are awesome not because they allocate resources efficiently on a moment to moment basis (as in a hypothetical perfect market equilibrium), but rather because they generate a “perennial gale of creative destruction” – innovation that upends old ways of doing things and replaces them with totally better ways. Capitalism, in other words, produces and diffuses innovation better than socialism. There are some inefficiencies along the way – friction in the system, temporary monopolies based on having innovated before your competitors – but that’s a price worth paying.

At least, that’s what Schumpeter thinks. Schumpeter is joined in this theorizing by the fictional President Josiah Bartlet on The West Wing, my favorite TV show of late. Bartlet is a Nobel-prize winning development economist turned politician and eloquent defender of free trade in an episode (“Talking Points“) that tries to examine both sides of the debate (as if there were two sides). The episode hinges around a conflict with the communication workers who learn that 17,000 programming jobs are going to be moved to India as a result of stronger intellectual property agreements. Bartler is practicing his talking points (hence the name of the episode), and after introducing Schumpeter’s phrase (“Hey, listen: Any economic advancement involves what Schumpeter called ‘creative destruction.'”) and being told to avoid using the word destruction, Bartlet goes on to say:

Global economic forces are unstoppable, just like technology itself. Should we have banned ATMs, to protect bank tellers? Or digital watches, to prop up the guys who fix grandfather clocks?

This quote interests me for a couple reasons. First, the quote pairs two strong and objectionable forms of determinism – economic and technological. Technological determinism has been the subject of much debate in the science, technology and society literature (e.g. Winner’s Do Artifacts Have Politics?, Wyatt’s Technological Determinism is Dead, Long Live Technological Determinism, see Nye for an overview). After the fact, we tend to think that technological progress had to move in a single direction – such as the development of the modern electricity system based on large generating stations and a grid to distribute it. Historical research often points out other paths-not-taken, not taken for political/social/accidental reasons rather than “purely” technological ones (in this case, micro-generation, much as we do for hot water via individual furnaces in buildings and houses).

Economic determinism is similar, with debates about it going back to at least Marx (e.g. “historical materialism”, “fetters”, all that jazz). And as in the quote from Bartlet, the two are often paired – economies must move forward in particular directions because technologies push forward in a single direction. It’s a neat setup, and one that historians of science, technology – and, I would argue, economics – ought to fight.

What’s all this got to do with Karl Polanyi? Polanyi was a mid-20th century economic historian/anthropologist/whatnot. Polanyi is most famously (at least in Soc circles) associated with the concept of embeddedness – the idea that the economy is never actually separate from other social institutions (language, custom, the rule of law, politics, etc.), but rather that it is always already embedded within them and could not function without them. Polanyi’s great work, The Great Transformation is treasure-trove of other useful ideas and concepts (see a forthcoming book by Fred Block and Peggy Somers for excellent examples).

One concept that I have not seen much discussed however is Polanyi’s emphasis on the rate of change of the society/economy. Polanyi often sounds like a technological or economic determinist – for example, in his analysis of the poor laws of England, he agrees with the commentators of the time that the system was inevitably doomed and needed to be reformed. Other times, Polanyi seems less determinist – I believe there is something of a small debate about this point which I hope to look into when I have some time. But even when Polanyi sounds maximally determinist about the forces of economic and social change, he argues that an emphasis on that determinism obscures the role of government in those changes: modulating the rate of change.

A belief in spontaneous progress must make us blind to the role of government in economic life. This role often consists in altering the rate of change, speeding it up or slowing it down as the case may be; if we believe that rate to be unalterable – or even worse, if we deem it sacrilege to interfere with it – then, of course, no room is left for intervention. Enclosures offer an example. … Yet, but for the consistently maintained policy of the Tudor and early Stewart statemen, the rate of that progress might have been ruinous, and have turned the process itself into a degenerative instead of a constructive event. For upon this rate, mainly, depended whether the dispossessed could adjust themselves to the changed conditions without fatally damaging their substance, human and economic, physical and moral… (Polanyi 1944 [2001]: 39)

In the example from the West Wing episode, the communications workers argue that many of their members have changed careers three or four times to try and keep pace with economic changes. Their lives are structured around long-term commitments with certain costs and obligations (“I’ve got three kids in college”) – they can’t simply retrain, move to a new place, and start over. The pace of these changes has picked up in many ways since Polanyi’s day, and certainly since the 17th-19th centuries which Polanyi discusses for most of his book. Entire industries might be eliminated in a matter of years or months. And there’s particular sign of things slowing down. So what now?

Years ago, I was relatively unsympathetic to these concerns. As another character argues in the show, people in India need jobs too, in fact more desperately than Americans (judged by global norms for wealth and prosperity). On the other hand… I think there is something to be said for the idea of government trying to modulate the rate of economic change to somehow match with our lifespans. There are plenty of bits of institutional inertia – the fetters on progress, as a Marxist might say – but instead of seeing these bits as problems to be overcome, I think we should see them as warning signs. Our metrics for well-being should take into account the costs, both easily measurable in terms of unemployment and harder to measure in terms of well-being, of economic upheavals. Sometimes – as in the case of same-sex marriage – I am completely unsympathetic to those who feel that the world is changing too quickly. In other cases – as for the unemployed former auto workers that are such a prominent part of the Michigan mindscape – I am much more so. I’m not actually that sure what distinguishes the two cases however, nor what we should be doing about either. But I think we should be taking the question more seriously. Just as economics often fails by examining “comparative statics” and “generalized equilibria” when the questions we want to know about happen in between the stable moments (which may or may not ever exist), I think political and social analysis should take seriously Polanyi’s notion that government should act on the rate of economic change, and that slower change might be a good in itself.

Erg. I hope I don’t sound like too much of a hypocritical luddite, writing on my shiny MacBook Pro laptop, with my wireless mouse, at my WiFi-enabled coffee shop, in my chummy university town funded largely to create precisely that perennial gale. So it goes.

* Though, did anyone read much of the decision? In general, I thought it was fantastic, but there were some interesting bits about why the state has an interest in marriage at all. Specifically, page 111 notes “The state regulates marriage because marriage creates stable households, which in turn form the basis of a stable, governable populace.” Foucault much? Reading that sentence, in contrast to all the surrounding bits about how marriage is about love and choice and etc. creeps me out a bit. Perhaps the state really shouldn’t be in the marriage business at all?



  1. andrew

     /  August 9, 2010

    i think a lot of economic sociologists experience a “moderating” of their views as they study economic phenomena. i took a class with fred block in which he had us read “surviving capitalism” by erik ringmar and “free to choose” by milton friedman. the class learned from both readings – or at least i did.

    since economics is not only about political choices – as dean baker also points out, but also about material conditions like supply and demand, there will be by necessity some harsh realities that will arise. so even a guy like noam chomsky will admit that because of govt. policy the past few decades, that america will indeed have to make do with a lower standard of living because we have to live up to our debts.

  2. joshmccabe

     /  August 15, 2010

    Good post. I realize its not his thesis, but I always took away a lesson about political, rather than economic, change from reading Polayni. The enclosure movement was a badly manage policy of privatization akin to what took place in some post-communist countries. There’s was the same backlash against markets in some eastern European countries in the 1980s despite years of oppression under communist rule because the change was so rapid and done so haphazardly as to blur the line between markets and politics. I would argue that what many perceived as market failures were actually political failures. I’ve heard similar arguments for the end of slavery or attempts to dismantle social security.

    As for rapidly decling industries, I’d be interested to see what kind of state intervention is present in those industries. Government protection of the auto industry insulated American car companies from the economic change that was happening around them for many years, but eventually it caught up with them and, I would argue, hit them much harder than it would otherwise. The problem with Polanyi is that he thinks, absent state invention, the “natural” rate of economic change is too fast for people. There is room for political contingency as to whether the state will intervene, but he is deterministic in that rapid economic change inevitably leads to ruin. I’m going to cop-out here and simply say whether economic change is “too fast” is socially constructed which Polanyi seems to dismiss in the paragraph you quote.

    Maybe we could even discuss this in person for once tomorrow night!

    • Alas, we didn’t get a chance to discuss this – in part because I just had a chance to read your comment! I think you are right that the ‘too fast-ness’ of economic (and, perhaps equally important and hard to parse out, technological) change is socially constructed… but so what? I don’t mean socially constructed here in some sort of pomo arbitrary sense. Rather, it’s based on how we cope with it, the institutions we have in place for understanding and managing it, etc. just like everything else that’s socially constructed. Polanyi sounds a bit more deterministic than that in the paragraph quoted, and I don’t know where I stand on him being a determinist overall. But I do think that the analysis of the social construction of the “too fast” problem is not separable from the analysis of the institutions in place to help us cope with changes. For example, I read a lot of Sci Fi and spend time kvetching about the lack of jet packs, flying cars, and replacement organs promised by my favorites. So, for me, change often seems too slow… But I also recognize that if suddenly a strong AI comes along that can write a better soc paper than I can, I’m pretty much tapped for useful skills, and I’ll still need to eat, and right now there wouldn’t be much of a net in place to catch me and help me find something useful to do. So it all rolls up together (like a good Katamari).

  3. since economics is not only about political choices – as dean baker also points out, but also about material conditions like supply and demand, there will be by necessity some harsh realities that will arise. so even a guy like noam chomsky will admit that because of govt. policy the past few decades, that america will indeed have to make do with a lower standard of living because we have to live up to our debts.

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